June 30, 2022

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Logistic groups snatch up supply-chain tech companies

Logistic groups snatch up supply-chain tech companies

Logistics behemoths and startups alike are planning for another year of snatching up supply-chain technology companies.

For the past two years, as global supply-chain woes took hold, legacy shipping companies and well-capitalised startups fuelled have pushed up the value of merger-and-acquisition activity for young companies offering logistics-related software and hardware. This year, the stock market rout that has cooled valuations for some private companies has created a more favourable acquisition market, some startup CEOs say.

Venture investors have pumped capital into startups operating in the logistics-tech sector on the thesis that helping to unsnarl supply chains will become lucrative business. That funding has provided some startups with deep pockets they in turn are using to pursue acquisitions of fellow startups.

Meanwhile, large shipping corporations are racing to expand their reach across the business-to-consumer market and have turned to acquisitions and increased startup investing. For instance, Danish containership company AP Moller-Maersk is preparing to make more acquisitions in the US as it aims to broaden its end-to-end reach over the supply chain.

The value of merger-and-acquisition activity of venture-backed logistics startups in the US reached $2.7bn in both 2021 and 2020, a nearly 69% increase from 2019, according to analytics provider PitchBook Data. Globally, the value of these deals reached $6bn in 2021 and topped out at $8.4 bn in 2020.

“I think we’ll see [mergers and acquisitions] continue to rise,” said Tony Jeffries, a partner at law firm Wilson Sonsini Goodrich & Rosati, which represents startups and investment firms in capital raises, initial public offerings and in M&A activity.

Fuelled in part by a $185m venture round completed in December, India-based BigFoot Retail Solutions, which does business as Shiprocket, has made several acquisitions in the past year and is aiming to do more, co-founder and chief executive Saahil Goel said. Shiprocket offers software that helps businesses organise and automate various shipping processes. Investors including food delivery startup Zomato, Temasek Holdings, Lightrock, and Moore Strategic Ventures participated in Shiprocket’s December funding round.

Chicago-based logistics-tech startup Project44 has also been on an acquisition spree recently. The company has made two acquisitions so far in 2022 and is planning to make several more in the first half of the year, founder and CEO Jett McCandless said. Project44, which develops software that offers companies supply-chain management and visibility of their freight, made several acquisitions last year to broaden its data inputs and analytic offerings.

In January, Project44 tapped investors including TPG Capital and Goldman Sachs Asset Management to raise $420m in a funding round that valued the company at $2.2bn.

From WSJ Pro VC